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Making an Impact: Assessing Streaming’s Role in the Digital Music Market

The streaming audio market is beginning to take the perturbingly familiar shape of the download market, with one big player stealing all of the momentum and scale. And the debate about what streaming brings to the broader digital music market continues to divide the industry across ever deepening fault lines.

But leaving aside for a moment the much visited discussions about artist payments and financial viability of the freemium model, what impact is streaming having on the overall digital market? To help answer that question I’ve compiled IFPI reported data for multiple international territories, including total market size and growth, digital market size and growth, physical share, download share and streaming share and mapped the relationships between them (see figure).

The results show that the streaming impact picture is a complex one with many permutations. There isn’t a definitive trend that affects all markets in a consistent manner, however a few interesting trends do emerge:

Streaming tends to get a foothold quicker in territories where the physical market is already in marked decline. Once it gets established the physical market decline accelerates. It is not possible yet to definitively conclude whether this is cause or effect.

Strong physical markets are more likely to have downloads dominate their digital markets.

Strong download markets tend to be more static.

Unsurprisingly the Nordic markets (Spotify’s back yard) are the strongest streaming markets, France remains a mainly download digital market despite Deezer’s efforts, as does the UK.

So the impact of streaming is a nuanced story. Over two years streaming certainly seems to have brought dynamic digital growth rates to a number of markets, and has accompanied, or driven, an accelerated CD decline.

The fact that downloads are stronger in CD markets is testament to the similarity of these ownership based models. But perhaps the strong similarity is one of the reasons that downloads aren’t growing the digital market as strongly as streaming is in other markets? Of course downloading has already had years to get established and so there is an argument that it has already contributed its dynamic growth phase to digital. This is probably true, but it shouldn’t be that way. With the exception of the US, no major music market has yet passed the 50% digital mark, and across all markets, the majority of music buyers still buy CDs. Which means that digital is still a long way from being in a position in which it could plausibly be called ‘mature’.

So digital growth does need to be happening at the rates we see in strong streaming markets, and not in strong download markets. And if streaming is the only tool with which those rates can be achieved then the questions around commercial sustainability (for the services and across the entire music industry value chain) become all the more pressing.